The Community of Madrid offers a 99% reduction in inheritance tax for close family heirs. So a daughter who inherits €600,000 from her father will pay, after the ‘bonificación’ rebate, just over €1,500. This came as a surprise to me and to the delegation of policy experts I led to Madrid to meet and learn from my friend Isabel Díaz Ayuso, President of the Community of Madrid and a proud Thatcherite.
Madrid’s enviable growth rates – according to CaixaBank its economy was estimated to have grown by 3.4% in 2024 – have been boosted by President Ayuso’s 34 tax cuts since taking power in 2019. Investment and highly skilled migrants have been pouring in from across Spain and further afield, perhaps explaining the buzz in the air as we passed by Madrid’s bustling tapas bars.
You’d be forgiven for thinking that, aside from remote and soulless tax havens, inheritance tax (IHT) is an almost universal feature across the globe, and that calls for its abolition are confined to the fringes of policy discussion. But you couldn’t be further from the truth.
It turns out that there’s a long list of countries that don’t levy what is widely acknowledged to be our most hated tax. No prizes for correctly guessing that you won’t find IHT in Singapore or Hong Kong, but to the surprise of many, they are joined by Canada, Australia, New Zealand and – wait for it – our Scandinavian neighbours Norway and Sweden. A remarkable narrative failure.
Sweden learnt the hard way. Founders of some of their greatest companies left: Tetra Pak founder Ruben Rausing emigrated in 1969, his sons followed in 1982; IKEA founder Ingvar Kamprad emigrated in 1973; industrialist Fredrik Lundberg emigrated in 1985. Only after IHT was abolished, perhaps surprisingly by the Social Democrats, the Green Party and the Left Party, did many entrepreneurs including Ingvar Kamprad return to Sweden.
Like Sweden, numerous entrepreneurs and high net worth individuals in the UK are voting with their feet, heading to places such as Dubai and Milan. Many understandably feel that their wealth has already been taxed before as income and savings through income tax, dividend tax and capital gains tax.
According to Siena Gold, Partner at Harbottle and Lewis, ‘the message from the non-dom brain drain is clear – inheritance tax is deeply unpopular and there are numerous other countries clients can go to instead. It’s not just about the tax – it’s about it feeling unfair and just overcomplicated.’
Henley & Partners projected last year that Britain was on track to lose 16,500 millionaires in 2025 – the largest of any country in a decade of Henley’s tracking. Critics dispute the precise number, and Henley itself profits from advising relocators. But HMRC’s own data, reported by the FT, confirms departures in line with the OBR’s projection that 25% of non-doms with trusts would leave. Britain, once a magnet for global wealth, is now becoming a net exporter of it.
Gold adds: ‘Instead of IHT, many other countries instead simply provide that heirs will pay capital gains tax on selling assets they inherit, with the “purchase price” being the cost of the asset when bought by the deceased. This leads to higher CGT bills as there is no automatic wiping out of gains on death, but it’s fairer: no gains = no tax; no sale = no tax immediately on death. Many international clients are astonished our system is so out of kilter with these principles – it is no wonder they are leaving in such numbers.’
As the Institute of Economic Affairs argues in its recent paper ‘A Taxing Inheritance’, IHT is not merely unpopular but economically harmful – arbitrary, distortionary, and an obstacle to entrepreneurship and international competitiveness.
The Conservative Party’s bold policy to abolish another poorly designed tax, stamp duty on primary residences, is a trailblazer. Supporting our farmers, entrepreneurs and other hard-working people by fully abolishing IHT – and in doing so pushing back against the politics of envy – is a natural next step and a policy that will age well, too.
Today, around one in 20 estates pay IHT, according to HMRC. Even before last autumn’s Budget, the IFS projected this would rise to roughly one in 14 by 2032–33, on the back of frozen thresholds and rising asset prices alone.
With pensions, farms and businesses now being pulled into the IHT net from 2026–27, analysis of OBR forecasts by Hargreaves Lansdown finds close to one in 11 estates paying IHT by 2030–31, almost double today’s rate. And because married couples typically pay IHT only on the second death, the IFS estimates one in eight people will face a bill by 2032–33.
The dynamic effects of abolition would also reduce its ‘cost’. Business investment would rise as owners no longer had to set aside funds for IHT bills. The residence threshold that disincentivises downsizing would disappear. And our smartest legal, accounting and insurance talent could be redeployed away from the deadweight loss of IHT planning towards real economic activity.
The time has come for the Conservatives to join our Anglosphere cousins and Scandinavian neighbours in abolishing inheritance tax once and for all. Like in the Community of Madrid, it will send a signal that we’re on the side of workers and risk-takers and that the UK is once again open for business. It’ll also make a small downpayment on reforming our unwieldy 23,000-page tax code.
